By vanko on March 27, 2011
To get a firm grasp of volatility’s effect on vertical spreads, let us examine three spreads against different implied volatilities while keeping the stock price constant at 67.5. These are the 60 – 65, 65 – 70 and 70 – 75 call spreads.
In-the-Money Vertical Spreads
Looking at the in-the-money spread (June 60 – 65), we see [...]
Posted in Develop Your Skill | Tagged lesson, options, trading, volatility
By vanko on July 29, 2010
Spread traders must understand how to properly calculate accurate volatility. In order to get accurate volatility levels, you must first determine a base volatility for the two options involved in the spread. Getting a base volatility must be done because different volatilities in different months cannot and do not get weighted evenly mathematically.
Since they [...]
Posted in Develop Your Skill | Tagged base, lessons, options, trading, using, volatility
By vanko on July 24, 2010
When purchasing a time spread, the investor should pay attention to not only the movement of the stock price, but also the movement of volatility. It plays a very large roll in the price of a time spread, which is an excellent way to take advantage of anticipated volatility movements in a hedged fashion.
Option [...]
Posted in Develop Your Skill | Tagged effects, mastery, of, on, options, spread, the, time, trading, volatility
By vanko on January 8, 2010
When vertical spreads are mentioned, they quite often come with monikers such as ‘bull’ and ‘bear’. This lends most to think of vertical spreads as directional plays which is true. However, vertical spreads can be used to take advantage of two other potential trading opportunities – time decay and volatility movement.
If you are looking for [...]
Posted in Develop Your Skill | Tagged and, decay, mastery, opportunities, options, time, trading, volatility
